As part of my new job, I’ve been reading up a lot on student loans and how they’ve been affected by the recent turmoil in the credit markets. Turns out that a lot of lenders have been pulling back on making student loans, even those guaranteed by the government, because they simply don’t have the liquidity to do more business. FinAid.Org has a list of what happened when, and looking through it, I was surprised to see this:
An Form 8-K SEC filing by CIT Group attributes $120 million in losses to student lending “reserves for private (non-government guaranteed) loans, principally to students of a pilot training school that filed bankruptcy during the quarter.” It also said that “Non-performing assets increased to $87 million from $8 million in the prior quarter reflecting the student loans affected by the bankruptcy of a pilot training school,” and that “Reserves for credit losses for our private student lending portfolio were increased by approximately $120 million (to approximately $138 million at March 31, 2008), primarily due to the previously discussed establishment of a reserve for loans to students of a pilot training school. There are no other large single-school exposures within the private student loan portfolio.”
In other words, they had eighty million dollars in outstanding loans to students from a single for-profit professional-training institute. Sure, that could be students from ten or even twenty years, given consolidation, but even so, you’d have to be pretty much the sole lender for students at a very expensive flight school to build up that kind of exposure. And it seems likely that the decision of the company to cease making student loans was more related to the school’s losses than to anything going on at Bear Stearns. It just seems bizarre.
Another thing I learned today: You can get a federally guaranteed student loan to get a degree in casino blackjack dealing.